Stephen Young please cite final version published in Geopolitics15, 3, 606-627
Gender, Mobility and the Financialization of Development
Stephen Young
Department of Geography, University of Washington, Seattle, USA
Abstract: This paper questions popular claims about the capacity of microfinance to reduce poverty and empower women in the global South. Instead, I posit microfinance as a contradictory development tool, one that creates possibilities for both the contestation and continuation of unequal social relations at multiple scales. The paper is divided into two major sections. I begin by examining the assumptions embedded in mainstream financial mappings of global space since the 1980s. In particular, I show how they privilege the transnational mobility of corporate capital and elide the everyday, place-based work of social reproduction. I examine the expansion and commercialization of microfinance in this context, as an alternative mechanism for enabling poor households to continue meeting their everyday needs by taking on more debt. In the second section, I draw on fieldwork in Andhra Pradesh, India, to show how these interlocking macro/micro financial flows interact with regional social histories to shape and differentiate people’s mobility ‘on the ground’ according gender, caste, and class. I conclude by suggesting how a critical geopolitics framework can help formulate new questions about microfinance as a development strategy.
Keywords: Financialization, Microfinance, Gender, Mobility, Development, India
I Introduction
The last two decades have seen the growing popularity of microfinance as a tool to promote economic growth, political stability, and gender equality in developing countries.For example, the UN declared 2005 the ‘Year of Microfinance’, and Mohammad Yunus, founder of the Grameen Bank, was awarded the Nobel Peace prize in 2006.Microfinance – or microcredit as it was more commonly known in the 1980s – is widely understood to have risen to prominence in concert with broader shifts in mainstream development thinking, which saw greater emphasis given to (i) ‘women’s empowerment’ and (ii) ‘grassroots’/community-based initiatives.[i] Typically, government agencies or non-profit NGOs would providecredit and savings facilities to people who did not have access to formal financial services. A system of ‘joint liability’, in which all borrowers in a group are collectively responsible for each other’s repayments, was used as a substitute for traditional forms of collateral. Women, in particular, were targeted as loan recipients and still constitute around 80% of borrowers worldwide.[ii]These small, short-term loans were to be used to develop opportunities for self-employment, which would in turn enhance their self-sufficiency. Moreover, the income generated by such enterprises would benefit the entire family and enable women to challenge their own subordinate position within patriarchal households. In this way, microfinance could tap the latent entrepreneurial talents of poor communities to create a ‘virtuous cycle’ of women’s empowerment and poverty reduction.[iii]
A growing literature has emerged in development studies, which constructively engages and critiques this rather sanguine story of social transformation. Some studies, for example, have tried to assess the extent to which women’s husbands continue to determine the use of and derive the benefits from microloans.[iv] Others have debated whether microfinance, particularly in the absence of other political programs, actually exacerbates tensions within the household and increases rates of domestic violence.[v] Some scholars have also pointed to the hierarchies within microfinance groups, which enable some women to dominate social and economic resources.[vi] Thus, whilst there is evidence of many positive changes resulting from microfinance programs, some studies have also drawn attention to its ‘darker side’.
I seek to expand these critiques by examining microfinance in relation to broader geopolitical and geoeconomic changes since the Cold War. I draw fromwork that explores how places and populations have been strategically repositioned in relation to the perceived opportunities or risks they present to global capital flows.[vii] This financialization of space seeks to expand and accelerate the mobility of capital, enabling information, investment, and investors, to move around the world more easily. It is underpinned by assumptions about the fiscal incompetence of developing countries, which must be made toreign in budget deficits and remove obstacles to the circulation of capitalin order to ‘emerge’ as viable markets in the global economy.[viii]I show how the increasing mobility and volatility of capital flows has enhanced the role of microfinance in enabling poor households to continue meeting their everyday needs.And as demand for credit continues to increase, I show how microfinance programs themselves are also being restructured and further integrated into global flows of financial technology and capital.
In the second half of the paper, I shift the scale of my analysis to explore how these interlocking, global macro/micro financial flows interact with particular regional social histories. More specifically, I draw on qualitative fieldwork conducted in coastal Andhra Pradesh, India to provide a more embodied account of how this financialization of development both challenges and reproduces gendered ideologies and social relations ‘on the ground’. For instance, whilst women’s entrepreneurship is widely celebrated by microfinance advocates, there is also a continuing emphasis within these programs on disciplining women to be ‘good mothers’, responsible for the everyday work of social reproduction.[ix] These dual responsibilities mean that their entrepreneurial activities are usually located in, or close to the home, which has further ramifications for how this work is experienced and how it is socially and economically valued.[x] It also allows for more comprehensive peer monitoring between clients, which microfinance institutions encourage as a way to reduce the possibility of loan defaults. Thus, whilst microfinance can enable poor women to challenge gender hierarchies in the family, it also structures and limits their spatial mobility in other important ways.
At the same time, recent efforts to further expand and commercialize microfinance in the region have increased the number of managers, advisors and intermediaries working in the industry. I show how these positions are often taken up by young, middle-class/caste men because of perceptions abouttheir natural abilities to be mobile, to adapt to new technologies, and to embody the kind of ‘fiscal responsibility’ that is sought in their clients. Their mobility is linked to new forms of cultural assertion, as many of these young men see themselves as financial entrepreneurs, connecting remote villages to global capital flows.[xi] This points to the continuing gender and class hierarchies within development thought and practice, which position poor women as being ‘empowered’ whilst reinforcingmany of the cultural and spatial boundaries of acceptable behavior.[xii]
This paper is based on eight monthsof fieldwork in 2007, half of which was spent in a small town in the coastal region of Andhra Pradesh. I conducted semi-structured interviews with 45 people, including government officials, and microfinance staff and clients, and attended several microfinance field visits and meetings. The paper begins by examining the financialization of global space since the end of the Cold War. I explore this process in relation to the retreat of the state and corporate sector from the work of social reproduction in many parts of the world. The growth of microfinance as a development strategy is then examined in this context, with particular attention paid to the way it contributes to the gendering of everyday responsibilities and mobilities.
II The Geopolitics of Global ‘Redlining’
Geopolitics is the practice of envisioning and representing global space in a way that reflects - though they are not always overtly stated - particular strategic interests. Most geopolitical treatises focus on some supposedly innate, objective difference between people and places – based on religion, race, resource endowment, and so on – that presents a threat. In some cases, this is used to argue for the construction of a more robust security apparatus to separate ‘our’ space from ‘theirs’. Alternatively, difference is understood as something to be tamed through diplomacy or, if necessary, militarism, to create a more unified, orderly world. This imperative has informed various efforts to ‘civilize’, ‘modernize’, and, more recently, to ‘globalize’ those parts of the world deemed to be lagging perilously behind.[xiii]
The work of critical geopolitics deconstructs these spatial representations, revealing their cartographic enclosures and erasures, and the material violences they produce. The spatial imagination I am interested in became particularly prominent in the 1990s. At this time, the red lines that had embellished many Cold War maps to represent Soviet expansion were gradually being displaced by anotherkind of ‘redlining’, which coded the world according to financial‘risk’. Understanding this financialization of global space requires examining the political-economic pressures and innovations that enabled finance capital to become more mobile in the 1990s.
The Bretton-Woods Regime and its Breakdown
Theglobal financial system of the post-war period was characterized by national capital controls and fixed exchange rates.[xiv] It was part of a broader regulatory regime amongst non-communist countries in which the state played an active role in coordinating global trade and channeling finance capital away from speculation and toward the needs of domestic industry and welfare. This system, which was always unevenly implemented, began to shatter in the 1970s when Nixon abandoned the Gold Standard, paving the way for floating exchange rates and a dramatic increase in the trading of global currencies.[xv]
The dismantling of the Bretton-Woods agreement led to ‘stagflation’ - recession coupled with high inflation - followed by a debt crisisthat brought about a relative halt to financial flows in many parts of the world.[xvi]The concern amongst many transnational banks and financial houses at this time was to both recoup their outstanding loans whilst avoiding a return to the Keynesian regulations that were seen as having repressed the mobility of finance capital in the post-war years. In the global North, the ‘baby boomer’ generation was approaching retirement and pension funds were looking to expand their portfolios into ‘exotic’ foreign markets that promised higher rates of return.[xvii]Many corporations, having seen manufacturing profits slumps in the 1970s, were also seeking to further diversify their activities and generate more profit through the financial sector.[xviii]A tightening of the constraints on capital mobility would clearly present a threat to such interests. Instead, the crisis was scripted by the IMF as having stemmed from the profligacy of indebted governments and ‘fiscal responsibility’ became the maxim by which those countries would be pressured to cut public spending, devalue their currencies, privatize public industries, and liberalize markets.[xix]
A number of studies have examined financializationin terms of its implications for citizenship and regimes of governance in the global North. In the face of growing economic volatility, even the average middle-class household had to think and act more like global investors, shrewdly managing their time and money based on anticipated returns.[xx] The proliferation of financial self-help literature, the boom in ‘plastic money’, and the advent of financial ‘day-traders’ certainly supports this claim.[xxi] However, as more investment began to find its way into foreign bond and equity markets there was clearly a crucial geopolitical component to this transition as well. In spite of the ‘end of geography’ claims of some commentators,[xxii] there was nothing natural about the appearance of ‘emerging markets’ at the end of the Cold War. New financial markets and subjectivities had to be constructed in order for capital surpluses to find profitable outlets. This meant extendingfinancial technologies and practices across global space.
The Financialization of Global Space
The last twenty years have seen the globalization of multiple financial innovations,many of which were developed on Wall Street.[xxiii]For example, through securitization, a practice that originated in the US mortgage market in the late-1970s, long-term loans could be bundled together and thensliced up and sold to investors as bonds with different returns depending on the default risk. This new ‘originate and distribute’ model of banking created enormous liquidity in consumer credit markets whilst linking mortgages, car loans, and credit card debts to global finance markets. It also created hundreds of highly-leveraged investment banks and funds around the world looking to purchase these derivatives in rapidly expanding secondary markets.[xxiv] These innovations helped to inspire the Brady Plan – named after its primary architect, US Treasury Secretary Nicholas Brady – which was adopted by the IMF in 1989 as a new strategy for dealing with the indebted countries. The plan sought to unblock international debt markets using similar instruments, which repackaged sovereign debts allowing them to be traded as bonds or swapped for equity investments in newly privatized assets.
The rapid increase inthe global trading of bonds, derivatives and other complex instruments also required intermediaries that could regulate these flows by providing investors with reliable information. This includes bond-rating institutions, which emerged from relative obscurity in the 1980s to become influential shapers of global public policy.[xxv]Bond ratings are considered an important indicator of how capable or willing a debtor is to repay a loan and, therefore, how expensive that loanwill be. For example, bonds that are graded as ‘speculative’ are deemed to carry a high risk of default, so investors will expect a high rate of return. Moody’s and Standard and Poor’s,[xxvi] the Wall Street-basedcompanies that dominate the industry, originally built their reputations publishing evaluations on the creditworthiness of US railroad firms in the late-19th century.As recently as the mid-1970s, both companies had only a handful of regional offices outside of New York City, employed just a few analysts, and were dependent on the sale of published research to generate revenue.[xxvii] However, as governments across the world became more dependent on global finance markets to raise much-needed funds, the scope and significance of their operations rapidly expanded. And whilst the rating process - which remains relatively secretive - is usually seen as a neutral, technical procedure, free markets and fiscal austerity are openly advocated. Indeed, political candidates who have proposed to buck this trend, by investing in social programs for example, have often found that this leads to lower credit-ratings,[xxviii] This has the effect of increasing the costs of borrowing, thereby whittling away the funds that would have been used for such programs.
Bond-rating agencies form just one part of a global assemblage of market surveillance technologies that rose to new prominence in the 1990s. The IMF closely monitored the macroeconomic policies of highly indebted poor countries and made the liberalization of capital movements an explicit part of its mission in 1997.[xxix] The International Finance Corporation [IFC], an offshoot of the World Bank, began compiling a database of ‘emerging’ and ‘frontier’ markets in 1986, which it later sold to Standard & Poor’s.[xxx]The European Bank for Reconstruction and Development [EBRD], sought to ‘normalize’ post-Soviet economies and enable their integration into the European Union.[xxxi]And the burgeoning business press began relaying every movement in the money markets, providing additional surveillance and evaluation of the global political-economic landscape.[xxxii]Through these financial mappings, countries were ranked according to their progress towardthe neoliberal norms that, it was claimed, would enable them to compete for and capture their share of global investment flows. Auditing,ratingand benchmarking practices must therefore be understood as geopolitical technologies that normalize certain policies whilst foreclosing the possibility of other trajectories of development.[xxxiii]By the end of the 1990s, in spite of a string of financial crises in Mexico (1995), Asia (1997) and Russia (1998), the World Bank had declared that ‘internationally mobile capital is here to stay’.[xxxiv]
III Embodying Financial Mobility
Terms such as ‘flow’ ‘circulation’ and ‘liquidity’ have now become popular metaphors to describe not just finance capital but all that is novel about today’s world; a world that is seemingly always on the move. However, claims about unfettered movement and flows obscure the ways in which mobility - of capital, technology, and people – is always structured and differentiated.Susan Roberts highlights the cultural masculinismin both business literature and popular financial self-help manuals, which emphasize the need to see the whole world from a detached, objective perspective.[xxxv] It is an example of what Haraway (1997) calls the ‘God Trick’, in which the observer is magically lifted out of their surroundings to a position of apparent omnipotence.[xxxvi] This imagination reflects the privileges of financial elites - mostly men - who, thanks to various highly selective ‘border-softening’ initiatives, can move more quickly and easily betweendifferent polities and social relations.[xxxvii] This masculinity is alsoperformed within the elite spaces of finance, where traders emphasize the need for physical toughness, a cool head, and a lack of emotion, characteristics which are culturally constructed as male.[xxxviii] These men are then seen as the heroic ‘pioneers’ of the financial world, embracing ‘risk’ and always looking to venture to new economic horizons. This view is embodied by investment gurus such as Warren Buffet, who advises would-be investors to be undeterred by global economic crises and ‘look at market fluctuations as your friend rather than your enemy’.[xxxix]